Federal Communications CommissionDA 01-2285

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of Application of
AIRCOM COMMUNICATION CONSULTANTS, INC.
Request for Waiver of 47 C.F.R. § 1.2109(b) / )
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ORDER

Adopted: October1, 2001Released: October 3, 2001

By the Chief, Policy and Rules Branch, Public Safety and Private Wireless Division, Wireless Telecommunications Bureau:

I.introduction

  1. This Order addresses multiple requests for waiver filed by AirCom Communication Consultants, Inc. (AirCom), a winning bidder for seven licenses in the Local Multipoint Distribution Service (LMDS) Auction (Auction No. 23).[1] Having failed to timely remit its required down payment for these licenses, AirCom now seeks a waiver of the Commission’s down payment and default rules to permit it to pay the entire outstanding balance owed.[2] In the alternative, AirCom requests that the Commission waive its down payment and default rules to apply monies on deposit in a manner that would permit the award of three of the seven licenses at issue.[3] For the reasons set forth below, we deny AirCom’s initial and amended waiver requests, dismiss the above-captioned application, and assess an initial default penalty against AirCom.

II.background

  1. On November 6, 1998, the Commission announced an auction of LMDS spectrum, and established March 29, 1999 as the deadline for submitting short-form applications (FCC Form 175).[4] AirCom timely filed its short-form application.[5] AirCom timely submitted an upfront payment in amount of $41,339.00. Subsequently, the Commission released a qualified bidder public notice for the LMDS Auction, which included AirCom.[6]
  2. Auction No. 23 began on April 27, 1999, and closed on May 12, 1999. On May 14, 1999, the Commission released a public notice announcing the close of the auction, the winning bidders for licenses, and the payment requirements.[7] Winning bidders were required to file long-form applications (FCC Form 601) and were required to submit to the Commission such additional funds as were necessary to bring their total deposits up to twenty percent of their high bid(s) by May 28, 1999.[8]
  3. As the winning bidder for seven licenses, AirCom’s net winning bids totaled $1,545,500.00.[9] To comply with section 1.2107(b) of the Commission’s down payment rules, AirCom was therefore required to deposit an additional $267,761.00 by May 28, 1999.[10] On May 26, 1999, the Navajo Nation submitted $68,848.00 to the Commission on the behalf of Aircom.[11] This remittance brought the total amount of money on deposit for Aircom to $110,187.00.[12] Although Aircom timely filed its long-form application, no further deposits of funds were made to the Commission. As a result, AirCom defaulted on its down payment obligation.[13]
  4. On July 13, 1999, AirCom submitted an amended FCC Form 601[14] and filed its initial waiver request seeking to acquire three of the seven licenses for which it was a winning bidder.[15] In so doing, AirCom disclosed, for the first time, that AirCom had bid on behalf of the Navajo Nation for three licenses (BTAs 162A, 162B and 392B), and intended to transfer those licenses to the Navajo Nation.[16] In addition, AirCom indicated that it had bid on behalf of Javier Castro (Castro) for the remaining four licenses.[17] On June 9, 2000, AirCom submitted an amended waiver request asking that the Commission allow it to acquire all seven of the subject licenses upon remission of the full payment owed.[18]

III.discussion

  1. Section 1.925 of the Commission’s rules provides that waivers will not be granted unless the petitioner affirmatively shows that either a) the underlying purpose of the rule(s) would not be served or would be frustrated by application to the instant case, and grant of a waiver would be in the public interest; or b) in view of unique or unusual circumstances, application of the rules would be inequitable, unduly burdensome or contrary to the public interest, or the applicant has no reasonable alternative.[19] For the reasons discussed below, we find that AirCom has failed to make a sufficient showing that grant of a waiver is warranted based on the circumstances presented.
  2. Pursuant to section 1.2107(b) of the Commission’s rules, a winning bidder must, within ten business days after being notified that it is a high bidder for a particular license(s), submit to the Commission such additional funds as are necessary to bring its total deposits up to twenty percent of its high bid(s).[20] Section 1.2109(b) of the Commission’s rules provides that a winning bidder who fails to timely remit the required down payment will be deemed to have defaulted, its applications will be dismissed, and it will be liable for the default payment obligations specified in section 1.2104(g)(2).[21]
  3. The Commission strictly enforces its initial down payment rules because these requirements serve critical underlying competitive bidding purposes that are essential to the auction process.[22] For instance, section 1.2107(b) of the rules promotes auction integrity by ensuring that a winning bidder assumes a binding obligation to pay its full bid amount at the close of an auction.[23] Furthermore, imposing prompt payment obligations reduces speculative or insincere bidding.[24] As the Commission has previously explained, “[t]he down payment requirement deters insincere bidders from winning licenses solely with the expectation that, postauction, they can ‘shop’ their winning bid in a late effort to obtain financing. Permitting such action, the Commission has stated, ‘would undermine the integrity of the auction itself.’”[25] Instead, the initial down payment provides a winning bidder with its first opportunity to demonstrate to the Commission that it is financially capable of deploying and operating a communications system.[26] Accordingly, the strict enforcement of the Commission’s down payment rules seeks to eliminate all but serious bona fide bidders from the auction process and to ensure that the licenses will be awarded to those that value them the most and are most likely to rapidly deploy service to the public.
  4. AirCom argues, however, that grant of the waiver would not compromise the integrity of the auction process because AirCom’s winning bid on behalf of the Navajo Nation did not involve an entity with insecure financing.[27] AirCom also asserts that neither AirCom nor the Navajo Nation attempted to “shop” the winning bids after the auction.[28] Without offering independent arguments distinct from the initial waiver request seeking selective default on four licenses, AirCom states that the default and disqualification rules should be waived to permit it to pay the total amount owed for all seven licenses and retain all seven licenses.
  5. As a qualified bidder[29] and as the winning bidder for the subject licenses,[30] however, Aircom was solely responsible for complying with all payment requirements in a timely manner. Granting Aircom a waiver of the down payment rules based upon its private contractual arrangements with third parties, would only serve to vitiate the applicant’s responsibility and invite applicants to speculatively bid at auction without taking the necessary steps to finalize their financial arrangements. Under the circumstances presented, we therefore find that AirCom has failed to show that its waiver request would not frustrate the underlying purpose of the Commission’s rules.
  6. Further, as stated above, the Commission has consistently refused to waive the default rules when an applicant has failed to make its initial down payment in a timely manner.[31] And, even where the Commission has occasionally determined that some flexibility of the default rules may be appropriate to address a minor delinquency or inadvertent error with respect to second down payments or final payments,[32] it has nonetheless remained essential that applicants can demonstrate their ability to pay. Thus, AirCom’s reliance on certain Commission decisions is misplaced.[33] None of the cases cited in AirCom’s requests involve a winning bidder who failed to satisfy the payment requirement immediately following the close of the auction.[34] Rather, in the cases relied upon by AirCom, the winning bidder either defaulted on the second down payment or the final payment.[35] Moreover, AirCom has not made any demonstration as a winning bidder that it had the requisite financial qualifications to speed service to the public or to put the spectrum to its most efficient use. Indeed, AirCom admits that it was unable to meet its initial payment obligations to the Commission because of a third party’s apparent unwillingness or inability to comply with contractual agreements.[36]
  7. Other cases that AirCom relies upon also do not support grant of its requested relief. In this regard, we note that two of the cases posited do not involve the default rules at issue in this case.[37] Similarly, the IVDS matter cited is not supportive of AirCom’s waiver request because the Commission denied the request to waive the default rules.[38]
  8. In addition, we reject AirCom’s argument that it would be in the public interest to grant its waiver request. According to AirCom, the public interest would be served because it intends to provide communications services to Native American tribal lands.[39] Claims that AirCom or the Navajo Nation intends to provide telecommunications services to Native Americans, however, neither excuse AirCom’s failure to comply with the Commission’s down payment deadlines nor outweigh the public interest in consistent enforcement of the Commission’s rules.[40] The Commission’s auction’s process must be both fair and consistent.[41] Maintaining the integrity of the auctions process benefits all applicants, including those that intend to serve, or are otherwise connected with Native Americans.[42]
  9. We also reject AirCom’s assertion that unusual circumstances make the application of the rule inequitable and contrary to the public interest.[43] Here, AirCom alleges that Castro failed to remit monies to the Commission for certain licenses won by Aircom, while Navajo Nation performed its obligations to do so.[44] Specifically, AirCom suggests that the Navajo Nation should not be punished for Castro’s failure to submit its portion of AirCom’s down payment.[45] We disagree. It is well established that a third party’s failure to perform in accordance with a business agreement is not an unusual circumstance that justifies a waiver of the Commission’s auction rules.[46] Thus, we believe that the failure of Castro to submit the outstanding portion of AirCom’s down payment obligation is an insufficient basis upon which to grant a waiver.
  10. For all of the reasons stated above, we deny AirCom’s amended request for a waiver to remit payment for the seven licenses. We also deny AirCom’s request to default on four of the seven licenses for which it was the high bidder. Although we cannot, at this time, determine AirCom’s total default payment, we will assess an interim default payment owed by AirCom, amounting to three percent of its defaulted net high bids for the subject licenses, or $46,365.00.[47]

IV.conclusion

  1. We conclude that AirCom has not demonstrated that grant of a waiver of the Commission’s down payment and default rules is warranted under the circumstances presented. Such a waiver, which would hamper the Commission’s ability to assess the financial qualifications of a bidder, would not contribute to the integrity and the effective and efficient implementation of the competitive bidding process as directed by Congress, and is not in the public interest. Consequently, AirCom is in default of its payment obligations, and we dismiss its application. We also assess an initial default penalty against AirCom in the amount of $46,365.00.

V.ordering clauses

  1. Accordingly, IT IS ORDERED pursuant to Section 4(i) of the Communications Act of 1934, as amended, 47 U.S.C. § 154(i) and Section 1.925 of the Commission’s Rules, 47 C.F.R. § 1.925, the Request for Waiver filed on July 13, 1999 and the Amended Request for Waiver filed on June 9, 2000 submitted by AirCom Communication Consultants, Inc. ARE DENIED.
  2. IT IS FURTHER ORDERED, pursuant to Section 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.§ 154(i), and Sections 1.2104 and 1.2109 of the Commission’s Rules, 47 C.F.R. §§ 1.2104, 1.2109 that application FCC File No. 0000014657 filed on July 13, 1999, by AirCom Communication Consultants, Inc. is DISMISSED.
  3. IT IS FURTHER ORDERED, pursuant to Sections 4(i) and 309 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), 309 and Sections 1.2107(b), 1.2109(b) and 1.2104(g) of the Commission’s Rules, 47 C.F.R. §§ 1.2107(b), 1.2109(b), 1.2104(g), that AirCom Communication Consultants, Inc. is assessed an initial default payment for licenses associated with BTA162A and BTA162B, Gallup, New Mexico; BTA392B, St. George, Utah; BTA121A, Eagle Pass, Texas; BTA124A, El Centro, California; BTA486A, Yuma, Arizona; and BTA244B, Las Cruces, New Mexico in the amount of $46,365.00.
  4. IT IS FURTHER ORDERED, pursuant to Section 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.§ 154(i), and Section 1.2104(g) of the Commission’s Rules, 47 C.F.R. § 1.2104(g) that AirCom Communication Consultants, Inc. will be subject to the balance of the default payment specified in Section 1.2104(g) of the Commission’s Rules, 47 C.F.R. § 1.2104(g) once the actual default payment is determined.

  1. This action is taken under delegated authority pursuant to Sections 0.131 and 0.331 of the Commission’s Rules, 47 C.F.R. §§ 0.131, 0.331.

FEDERAL COMMUNICATIONS COMMISSION

John J. Schauble

Chief, Policy and Rules Branch

Public Safety and Private Wireless Division

Wireless Telecommunications Bureau

ATTACHMENT A

LICENSES WON

Market No.Net Bid Down Payment Due Final Payment Due

BTA 121A / $234,850.00 / $46,970.00 / $218,106.28
BTA 124A / 337,700.00 / 67,540.00 / 313,623.55
BTA 162A / 134,750.00 / 26,950.00 / 125,142.95
BTA 486A / 248,050.00 / 49,610.00 / 230,365.18
BTA 162B / 53,900.00 / 10,780.00 / 50,057.18
BTA 244B / 298,650.00 / 59,730.00 / 277,357.63
BTA 392B / 237,600.00 / 47,520.00 / 220,660.22
Total Due / $1,545,500.00 / $309,100.00 / $1,435,313.00
Total Paid / $110,187.00

DEFAULTED LICENSES

Market No.Net Bid Default Deposit (3%)

BTA 121A / $234,850.00 / $7,045.50
BTA 124A / 337,700.00 / 10,131.00
BTA 162A / 134,750.00 / 4,042.50
BTA 486A / 248,050.00 / 7,441.50
BTA 162B / 53,900.00 / 1,617.00
BTA 244B / 298,650.00 / 8,959.50
BTA 392B / 237,600.00 / 7,128.00
TOTAL: / $1,545,500.00 / $46,365.00

1

[1] Aircom was a winning bidder in Auction No. 23 for the Gallup, New Mexico (BTAs 162A and 162B); St. George, Utah (BTA 392B); Eagle Pass, Texas (BTA 121A); El Centro, California (BTA 124A); Yuma, Arizona (BTA 486A); and Las Cruces, New Mexico (BTA 244B) markets.

[2] AirCom Communication Consultants, Inc., Petition for Limited Waiver and Request for Expedited Treatment (filed July 13, 1999) (Waiver Request); AirCom Communication Consultants, Inc., Amended Petition for Limited Waiver and Expedited Treatment (filed June 9, 2000) (Amended Waiver Request) (incorporating its initial waiver request and expanding the waiver request to include retaining all seven licenses).

[3] Amended Waiver Request at 2.

[4]See LMDS Spectrum Re-Auction of 168 Licenses Scheduled for April 27, 1999, DA 98-2266, Public Notice, 13 FCC Rcd 22523 (1998).

[5]See Application to Participate in a FCC Auction, FCC Form 175, submitted by AirCom Communication Consultants, Inc. (filed Mar. 29, 1999) (FCC Form 175 Application).

[6] Auction of 161 Local Multipoint Distribution Service (LMDS) Licenses, Public Notice, 14 FCC Rcd 6505, Attachment A (1999) (Qualified Bidder PN).

[7] Local Multipoint Distribution Service Auction Closes, Public Notice, 14 FCC Rcd 8543, 8543 (1999) (Closing PN).

[8]Id. at 8544. See also 47 C.F.R. § 1.2107.

[9]Id. at 8554, 8557, 8558.

[10] Twenty percent of AirCom’s high bid, $1,545,500, is $309,100. Since $41,339 was already submitted to the Commission through AirCom’s account, the remaining amount due for the down payment was $267,761.

[11]See Waiver Request at 2; see also Letter from Mitchell F. Brecher, Greenberg Traurig to Magalie Roman Salas, Secretary, Federal Communications Commission (May 21, 2001) (AirCom Letter I).

[12]See Closing PN, 14 FCC Rcd at 8560 Attachment B (indicating receipt of $41,339 as AirCom’s upfront payment and a balance of $267,761 to satisfy its down payment obligation) and Waiver Request at 2.

[13] 47 C.F.R. § 1.2107(b). As of the close of the auction, AirCom owed $267,761 for its down payment obligation. See supra n.12. After the close of the auction, $68,848 was credited to AirCom’s account and remitted to the Commission, which leaves a balance of $198,913 needed to satisfy AirCom’s down payment obligation.

[14] Application for Wireless Bureau Radio Service Authorization, FCC Form 601, as amended, submitted by AirCom Communication Consultants, Inc. (filed July 13, 1999) (Long-Form Application).

[15]See Waiver Request at 1-2, and 4.

[16]See Waiver Request at Exhibit A; see also Long-Form Application at Exhibit A.

[17] Amended Waiver at 2; Waiver Request at 2. This second client, Javier Castro (Castro), was not listed in either AirCom’s FCC Form 175 Applications or FCC Long-Form Applications for BTAs 121A, 124A, 486A and 244B. AirCom only disclosed Castro’s role in its waiver requests.

[18]See also AirCom Letter I (requesting expedited treatment of AirCom’s pending waiver requests).

[19] 47 C.F.R. § 1.925(b)(3).

[20] 47 C.F.R. § 1.2107(b); see also 47 C.F.R. § 101.1105.

[21] 47 C.F.R. § 1.2109(b); 7 C.F.R. § 1.2104(g)(2). Specifically, a defaulting bidder is required to pay the difference between the amount bid and the amount of the winning bid the next time the license is offered by the Commission, plus an additional amount equal to three percent of the defaulter’s bid or the subsequent winning bid, whichever is less. 47 C.F.R. § 1.2104(g)(2). In the event the subsequent winning bid is greater than or equal to the defaulted bid, the total default payment is equal to three percent of the winning bid. Id. If the default payment cannot be determined because the license(s) have yet to be won at a subsequent auction, then the Commission has stated that it will assess an initial default deposit of between three percent and 20% of the defaulted bid amount. Amendment of Part 1 of the Commission’s Rules – Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz Transferred from Federal Government Use, Third Report and Order and Second Notice of Proposed Rule Making, WT Docket No. 97-82, 13 FCC Rcd 374, 434 ¶ 102 (1997). After auction of the license(s), the total default payment will be calculated and the Commission will either assess the final balance or refund any amounts due to the defaulting bidder. Id.

[22]See TPS Utilicom, Inc., Order, DA 01-1833 at 4-5 ¶¶8-9 (WTB CWD rel. July 31, 2001) (TPS); see also21st Century Telesis, Inc., Memorandum Opinion and Order, FCC 00-434 (rel. Dec. 21, 2000) (Telesis); BDPCS, Inc., Memorandum Opinion and Order, 15 FCC Rcd 17590, 17598-99 ¶¶ 15-16 (2000) (BDPCS MO&O); National Telecom PCS, Inc. Order on Reconsideration, 14 FCC Rcd 18822, 18827 ¶ 12 (1999) (NatTel); Phoenix Data Communications, Inc., Order on Reconsideration, 14 FCC Rcd 21122, 21124 ¶5 (1999) (Phoenix Data); Commercial Realty St. Pete, Inc., James C. Hartley, Teresa Hartley, and Ralph E. Howe, Memorandum Opinion and Order, 15 FCC Rcd 7057, 7072 ¶ 15 (1999) (Commercial Realty St. Pete); In the Matter of Grand Connectivity, L.L.C., Order, 14 FCC Rcd 13943, 13943-48¶¶ 2-8 (1999) (Grand Connectivity); C.H. PCS, Inc., Memorandum Opinion and Order, DA 99-1166 ¶¶ 2-3 (WTB 1999) (CH PCS MO&O.)

[23]Amendment of Part 1 of the Commission's Rules - Competitive Bidding Procedures, WT Docket No. 97-82, Order on Reconsideration of the Third Report and Order, Fifth Report and Order, and Fourth Further Notice of Proposed Rulemaking, 15 FCC Rcd 15293, 15328 ¶ 69 (2000).